2nd Circ. Nixes Student Loan Arbitration Clause

Law360, New York (July 14, 2010, 3:24 PM EDT) -- In a putative class action over alleged hidden penalties on student loans, a federal appeals court has cleared the way for a debt-saddled lawyer to sue loan servicer Affiliated Computer Services Inc., rejecting the company's bid to compel arbitration.

The U.S. Court of Appeals for the Second Circuit upheld a lower court's ruling Monday, saying a clause in Joshua Fensterstock's loan agreement that required him to arbitrate his claim was unconscionable under California law.